Shaken, but still unstirred - Report recommends amendments to the Australian innovation patent system

The final report on the review of the innovation patent system by the Advisory Council on Intellectual Property (ACIP) has been published1 . ACIP was unable to recommend retention or abolition of the innovation patent system. However, ACIP were not in favour of maintaining the status quo and made the following 6 recommendations to the Australian government on the future of the innovation patent system:

If the system is to be retained, the other recommendations should be implemented;

Raise the level of innovation required for an innovation patent;

Set a 3 year deadline for requesting examination of an innovation patent;

Exclude methods, processes and systems from innovation patent protection; and

If the preceding recommendations are accepted, that the current remedies for infringement of an innovation patent be retained.

ACIP is an independent government-appointed advisory body that advises the government on IP policy matters. ACIP was asked in 2011 to review the innovation patent system and specifically to investigate the effectiveness of the innovation patent system on stimulating innovation by Australian small to medium enterprises (SME). In 2013, we reported on ACIP’s Options Paper2 which reviewed the submissions made to ACIP and statistical usage data obtained as well as the proposed options for moving forward. Three proposals were presented in the options paper: a) no change, b) abolish the system or c) change the system. Following the release of the Options paper, further submissions were accepted and discussions with stakeholders were held.

A summary of ACIP’s recommendations from the final report are presented below. The ACIP report further details the reasoning behind its recommendations and provides commentary on the other options previously presented that have not been recommended.

Recommendation 1 – Amend the system if retaining it

ACIP was unable to obtain adequate evidence on whether the current system does or does not stimulate innovation in Australian SMEs. Therefore, ACIP could not recommend whether to retain or abolish the innovation patent system.

There is evidence to support changing the innovation patent system and, if the government retains the system, ACIP urges the government to implement the other recommendations made.

Recommendation 2 – Raise the innovation threshold

Presently, a claim for an innovation patent must only vary from the prior art in a way that provides a ‘substantial contribution to the working of the invention’ to be valid. ACIP found during the course of its review that this required level of innovation for an innovation patent was considered to be too low by stakeholders.

ACIP recommends raising the level of innovation required for an innovation patent, but not so high as the current inventive step requirement that applies to standard patents.

The recommended level for innovative step is for the invention to be non-obvious compared to the common general knowledge (CGK) in the relevant art, anywhere in the world. This test therefore excludes prior art that is not considered to be CGK. The recommended test is based on the test for inventive step described by the High Court of Australia in Minnesota Mining & Manufacturing Co v Beiersdorf3 except that CGK outside of Australia is also to be considered. A scintilla of inventiveness above CGK was considered sufficient by ACIP. As discussed in the report and previously in the options paper, ACIP favoured this approach to innovative step over an entirely new formulation, as there is already a body of case law dealing with it.

Recommendation 3 – Deadline to request examination

Examination of innovation patents is currently optional and ACIP’s review found that only about 18% of innovation patents are examined and certified. The large percentage of uncertified innovation patents is considered to contribute to uncertainty in the innovation patent system as it is not clear whether the uncertified innovation patents are valid.

ACIP recommends making examination of innovation patents mandatory. This brings them into line with standard patents.

Examination of innovation patents must take place within three years from filing the innovation patent. Three years was considered by ACIP as being sufficient time for a patentee to evaluate the commercial potential of their innovation patent. Also, as noted in the Options paper, only around 50% of innovation patents are renewed after three years from filing.

ACIP suggested that the Patent Office could impose an additional search fee for applications that haven’t already been searched. However, ACIP also suggested investigating whether a ‘small entity’ discount could be offered to SMEs.

Recommendation 4 – Clarify the use of the term ‘patent’

ACIP found that, within the broader community, there is a perception that a ‘patent’ has some form of legally-enforceable right. This is not the case for an ‘innovation patent’ until it has been certified.

ACIP recommends that the term ‘patent’ only be used for innovation patents that have been examined and certified. The term ‘innovation application’ is suggested to describe a patent application for an innovation patent before it has been certified.

Recommendation 5 – Exclude methods, processes and systems

ACIP recommends excluding all methods, processes and systems from being patentable for an innovation patent.

One of the reasons given in support of excluding methods, processes and systems was that no other developed economy offers lower tier protection for these types of inventions. The ACIP report also states that methods and processes are inherently protected to some extent because they are more difficult to reverse engineer than a product and more easily protected as a trade secret.

The recommendation to exclude systems is intended to exclude methods and processes being recast as systems and restrict protectable inventions to ‘an apparatus, product, article or some other material thing’.

ACIP acknowledged that stakeholders in the software industry argued and provided cogent evidence that the effect of innovation patents for methods, processes and system significantly undermines innovation in that sector, particularly innovation by SMEs. However, ACIP did not make any additional recommendations to exclude software from innovation patent protection beyond the exclusion of methods, processes and systems.

Recommendation 6 – Not amending remedies available

ACIP recommends, subject to the preceding recommendations being accepted, leaving the current remedies for infringement of an innovation patent unchanged.

The existing remedies are considered suitable if the level of innovation is raised and certain subject matter has been excluded.

The next formal step in this process will be the Government’s to consider ACIP’s recommendations and respond, potentially followed by formulation of amendments to the legislation. However it is likely that this final 'stirring' of the innovation patent will take years at best.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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